Iceland Attracts New Business with Clean Energy

Fishing has long been a vital industry in Iceland. It's so imprinted on the national psyche that it's hard to find anyone untouched by it among the tiny population of 320,000. Even Foreign Minister Össur Skarpherdinsson likes to say, "I consider myself to be an old fisherman."

Skarpherdinsson now hopes his angling skills will come in handy as he and Iceland cast about for something decidedly different from the customary haul of smelt, herring, cod, mackerel, and other creatures.

The North Atlantic island is trying to reel foreign industry on to its shores to prop up an economy still recovering from the 2008 banking collapse. For bait, it is dangling what no other country in the world can — 100 percent renewable electricity.

Renewable Unleashed

Iceland generates all of its power from hydro and geothermal sources. There’s not a coal- or gas-fired station in sight. No nuclear reactors, either. In a global economy that increasingly values green, Iceland hopes to lure businesses from across the metals, chemicals, media, agriculture, and IT industries.

“This is the beginning of a new chapter in the industrial life of Iceland,” says Skarpherdinsson. “The greatest advantage in the future will be green, renewable energy with no carbon.” He was speaking to journalists in Reykjavik earlier this month while saluting an early catch: British data hosting company Verne Global.

Verne recently opened a data center in a sprawling former NATO munitions warehouse on a windswept lava plain in Keflavik, 29 miles southwest of the capital, connected via subsea fiber lines to Europe and the U.S.

Verne is just the sort of foreign presence that Iceland hopes will alleviate an unemployment rate of six percent — astronomical in a land accustomed to one percent.

That's Cool

But “green” is just part of the power play. So, too, is the price of electricity, which CEO Hordur Arnarson of state-owned utility Landsvirkjun calls “the most competitive price in Europe.” Landsvirkjun intends to keep it that way too. It locks in rates for a dozen years or more — enticing amid volatile fossil fuel prices.

It all helped bring Verne.

“We are able to serve the international community from our 100 percent renewably powered data center,” says Verne CEO Jeff Monroe. “What we have done as a first mover here in Iceland is we have secured a long-term power contract with Landsvirkjun that is substantially better than what you’ll see as the published rate — and you get green without paying the premium.”

By locating in a climate where annual average temperatures range from around freezing to 56 degrees Fahrenheit, Verne is slashing the amount of electricity it uses to cool its data center. That delivers a financial benefit as well as an environmental one. Verne is able to cool its computers using only natural air circulation, eliminating the refrigeration systems that can account for over half of a data center’s power usage.

Verne itself is beginning to sign customers. UK telecommunication and network services firm Colt is building a “point of presence” at the data center, tying it into its private network for companies in 21 countries. Other Verne clients include Jersey City-based Datapipe, an IT services firm that supports financial and technology industries in New York and London; CCP Games, the Icelandic creator of the popular game EVE Online; GreenQloud, a Reykjavik cloud computing services firm; and Opin Kerfi, an Icelandic systems integrator.

The company is expecting business to continue to perk up late in the year, when Iceland is scheduled to fire up an additional — and faster — subsea fiber line to join those in place and run by Icelandic firm Farice. While the Farice connections to Europe and North America are fast enough for many applications, they cannot support certain super fast transactions, like derivatives trading.

Raging Debates

This isn’t the first time Iceland has attempted to lure foreign business. The country has had limited success diversifying away from fishing, aluminium, and tourism — their three big industries.

But creating growth isn’t as simple as it sounds. Growth in general contends with Iceland’s strong environmental movement.

Icelanders don’t agree on how much more energy they can tap from the country’s vast geothermal and hydro sources. Many people believe it’s at least two times more and could be much higher. Even among growth enthusiasts, strong-minded localities fight each other to land new business. Politics is as fiery as the volcanoes on this island where Jules Verne sent his explorers to the center of the earth.

Although the debate rages on, Iceland is focused on attracting foreign companies.

“We will do everything within our means to make this a story of great success,” says Skarpherdinsson. The old fisherman hopes that his vision turns into a tale of the big one, not of one that got away.

7 Comments

As stated in the comment above, many countries have similar geothermal power available.
Better still, almost every country could use the lower heat levels available just below the ground surface in most countries to heat nearby homes and factories very economically. The plant is presently expensive, but mass production should bring costs down.
Solar energy from deserts round the world is another constant sourge (with salt storage when the sun is 'off' during nightime).
Wave and tidal are also pretty permanent alternative sources of energy in many seas around many countries.
Hydrothermal energy can also be drawn from water even more efficiently than soil, as was done in the Royal Festival Hall in the Uk. A direct current grid, connecting Iceland with the UK, Europe and Africa etc, with similar networks worldwide, should not only allow the electricity to be available when and where needed, but even has the potential to link countries irreviocably together in a peaceful network. This is alreading being planned, with solar furnaces already being built in Spain and Morrocco.
Withe the present monentary crisis, what is more important than such capital projects to provide employment and free or low-cost power?

Canada's in-place geothermal power exceeds one million times Canada's current electrical consumption.

ANONYMOUS
May 2, 2012

Iceland has massive hydro and geothermal power generation capacity and a tiny population. But Iceland is too remote to export its excess power. So Iceland has wisely encouraged manufacturing businesses that consume lots of electrical power to relocate there.

Aluminum smelting is one perfect example. One big issue that concerns manufacturers who use lots of aluminum in their products, like auto companies, is the price stability of aluminum over time. When an auto company decides to use aluminum for a particular component on their car, they have to be able to predict their cost for aluminum 4 or 5 years into the future. If they guess wrong the company can potentially lose large amounts of money, since profit margins in the OEM auto business tend to be fairly tight.

Smelting aluminum requires lots of electrical power, and with the large variation in electrical power costs most markets experience from year-to-year, the price of aluminum also tends to be somewhat volatile. Aluminum price volatility is one major reason most auto OEMs still use steel. The price of steel and cast iron is much more stable.

Using Iceland's cheap, stable and reliable hydro power to smelt aluminum is smart for many reasons. It will ensure long term price stability for raw aluminum. In turn that long term price stability will result in more widespread use of lightweight aluminum for vehicle applications like automobiles, ships, trains, trucks, etc. And the more widespread use of aluminum in vehicles will result in better fuel efficiency. A small change with a huge global impact.

Finally, consider the process of using hydro power to smelt aluminum in these terms: Much of the electrical hydro power used is captured in the finished aluminum product. The process of extracting that hydro energy from the environment and storing it in the form of aluminum should have a net "cooling" effect, right?

Touche sun2energy but there are ways to ween off of coal and gas. It's people with lack of knowledge and are too ignorant to understand the harmful effects burning coal and gas create. And I wasn't speaking specifically about NJ and their "concepts".

No other country has the resources Iceland have; lots of rain, snow and volcanos. Once Raytricity figures out how to create volcanos and huge snow fields in New Jersey their concepts might catch on. For now coal and gas will rule.

Stepping away from the political stand point, I think that it's incredible that this country is taking green energy to another level. I, personally, had no idea that Iceland ran on green energy and JUST green energy. I think if one country can do it, the rest of us can follow. It's just a matter of time before it catches on. I just hope that it's comes sooner rather than later.

My company, Raytricity, is based out of Princeton, NJ and we're trying to educate the state about how solar energy is booming and it's actually quite affordable. We offer many options for going solar, so if you're in the area and interested in what it would cost you give us a call or visit our website for a FREE quote.